International Banker

U.S. banks like what they see in Poland.

The Eastern European nation is privatizing its banks and pension funds, and U.S. institutions are flourishing there, along with their Western European counterparts.

Bankers and analysts alike praise the Polish market and its fundamentals, seemingly untouched by the storm ravaging Russia, its neighbor and historical foe.

BankAmerica Corp. started with a representative office two years ago. It then got a bank license late last year and opened the doors of its fully owned subsidiary this year.

On the wholesale side, Bank of America Polska focuses mostly on three areas: capital markets activities, including foreign exchange risk management and money trading; cash management, its second core revenue source; and raising debt capital, said Michal Surowski, an ex-banker for Societe Generale who joined the bank last summer. The bank also has a venture-capital subsidiary, he said.

Half its corporate clients are Polish, and half are multinational, including U.S. companies. Poland is a safe harbor right now, said Mr. Surowski, a corporate finance associate.

Chase Manhattan Corp. inherited Chemical's rep office in their 1996 merger, and the banking company considers Poland a "significant place," a bank officer said. "Poland is the largest market in this part of the world," he said. Chase uses its office as a marketing outpost, staffed with four professionals and a small clerical staff.

Ford Motor Co., the U.S. car maker, recently got a limited banking license in Poland, which lets it take deposits and lend to its car buyers.

Ford was soon followed by Italy's Fiat. Furthermore, a U.S. insurance company, AIG Consumer Finance Group, acquired Bank Podlaski SA in April.

Most of the foreign financial institutions in the country are operating wholesale banks, although some have also acquired local institutions and ventured into the retail market.

Some have also formed highly successful joint ventures, such as BNP and Dresdner.

In the latest such acquisition, Germany's Vereinsbank, according to sources, is doing due diligence for the acquisition of Bank Przemyslowo- Handlowy SA, a Krakow-based bank owned mostly by the government. The short list of bidders included only European banks, according to sources.

"The Polish market is one with great potential because of" its large population, said Sally Wicken, a London-based Thomson BankWatch analyst.

The pace of reforms has also been steady, even if Poland started later than some of its neighbors, such as the Czech Republic. "We were never the first people in the class, but our reforms were deeper," Hanna Gronkiewicz- Waltz, president of Narodowy Bank Polsi, the Polish central bank, said in a recent interview.

Recent banking reforms include adoption of prudential regulations and on-site supervision of banks, she said.

Wroclow-based Bank Zachodny SA is expected to be privatized early next year and will be up for grabs by foreign institutions as well.

"We'd prefer to give (foreign institutions) the banks because we know their know-how is better," said Ms. Gronkiewicz-Waltz, who is now in her second term and has established a reputation as a tough and efficient regulator.

Commerzbank controls 48% of Bank Rozwoju Eksportu SA. IBP Bank SA is now controlled by France's Credit Lyonnais.

The Netherlands' ING has been the biggest overseas institution in Poland in terms of assets since its acquisition of Bank Slaski. Next is Citibank, which created its own network in the country and built its success on the issuance of international cards. In third place is the local subsidiary of a joint venture between Banque Nationale de Paris and Dresdner Bank.

The BNP/Dresdner venture started later than most, and suffered as a result, said Pierre Gauthier, its Canadian-born president.

"Our first year was disappointing," he said, because the bank assumed its French and German customers already doing business in Poland would automatically join the bank. "But they did not," he added.

These customers had already chosen other banks and mostly remained with them.

This quiet first year produced unexpected results: The bankers had time to develop new products, which in turn helped to gradually make a name. The bank now has seven branches and, as of July, had more than $400 million in capital.

The expected privatization of pension funds will mostly boost the activity of insurance companies, he said.

But bank insurance operations at some institutions, such as ING, Deutsche Bank, and Dresdner Bank, which owns 68% of Hestia, Poland's largest insurance company, may see a tremendous boost as well.

Instead, BNP/Dresdner focuses on products largely unknown in Poland, such as options, swaps, and forwards, which are used by multinational companies to hedge against the devaluation of the Polish zloty.

Among BNP/Dresdner's corporate clients, U.S. companies now represent 17% of revenue.

The institution just started a private-banking division that caters to high-net-worth individuals and takes advantage of Polish laws allowing some placements abroad through banks, Mr. Gauthier said.

He said he is now about ready to launch a leasing subsidiary, BNP/Dresdner Polska Leasing, which will take advantage of an expected law that would provide tax breaks for companies leasing goods.

International Banker, American Banker

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